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Wednesday, 17 June 2015

Should
we boycott the brands and store chains that make use of poorly treated and paid
‘slave workers’ from Pakistan, India and Bangladesh, in order to enforce better
labour circumstances?! And consequently
deprive these people from their desperately needed income?!

Everybody who is walking in a modern shopping street or
mall in Smalltown, Europe or Littleville in the United States, is unperceived confronted
with the Third World and in particular, the low wage countries in the Middle
and Far East, where many of the clothes, shoes and accessories are manufactured.

Exotic countries and locations, like Thailand,
Cambodia, Bangladesh, Vietnam, India, Pakistan or China are hosting the
mega-factories and ‘sweatshops’, where the vast majority of these well-known products
are produced, during long, long days of hard labour against the smallest of hourly
wages.

Modern sports, fashion and lifestyle brands like Levis,
Gap, Walt Disney, Benneton, Nike and Adidas or inexpensive store chains, like Walmart,
Zara, Primark, C&A and H&M would be immediately out of business without
these classic low wage countries. Just for the simple reason that only these
countries are willing to produce their fashion and footwear at the absolute bottom
prices, which are required by the frugal, modern day consumer.

As a matter of fact, this modern day consumer is a very
spoilt consumer. He or she wants to have multiple brandnew collections of fashion,
accessories and footwear per year, at almost the same prices as in the Seventies
of last century. And sometimes at even lower prices than usual in those days.

Nowadays the fashion collections have a much quicker
maturity date, which leads to a minimized earn back period for new collections and
almost continuous clearance sales throughout the year. All these circumstances
make that production at the absolute bottom of the price spectrum is mandatory
to survive.

Only the French and Italian luxury brands, like Corneliani,
Brioni, Prada, Gucci, Chanel and Louis Vuitton still manage to produce most of
their (extremely expensive) fashion and footwear in Europe (mainly in France
and Italy) or North Africa, without making concessions to their production
quality. However, this became impossible for the brands and store chains, which
sell daily usable, ready-to-wear fashion to the lower and middle classes of
Europe.

One can reckon, in 1975 an experienced seamster and
tailor of ready-to-wear clothes probably made around
€6 in gross per working hourin The Netherlands, which had an
impressive fashion and shoe industry in those days. This amount included applicable
taxes and social premiums.

In 2013, however, the same professions would have
earned around €19 per hour for the same amount of labour in The Netherlands,
due to inflation (see the table behind the aforementioned link).

Even when computerized looms, sowing machines and fabric/leather-cutting
robots would have dramatically increased the production quantities and efficiency,
as well as dramatically reduced the material usage in clothing and footwear
plants, this would still mean that the same quality of clothes and shoes would cost
about 2.5 times as much as they did in those days in the Seventies.

Not only the domestic manufacturing process became more
expensive since then, but also the raw materials needed for the production of
these fashion and footwear. About the same price and wage increases took probably
place in the rest of Europe and the United States.

But now comes the strange part.

Where a basic pair of jeans and trousers from an in-store
brand cost about €20 to €40 in those days and a pair of jeans from a famous
jeans brand, like Levis, Lois or Wrangler cost about €50 to €60 in the
seventies and early eighties, these prices for the same jeans and trousers hardly
rose as of 2015. Likewise with shirts, polos, shoes and other clothing items.

The same happened with footwear and accessories,
especially the ones for children. In those days in the Seventies, a good pair
of domestically manufactured shoes for children cost about €35 - €60 and again
this price hardly rose or even dropped in the years since then, although one
might expect exactly the opposite.

One will understand that something had got to give to
enable similar products at similar prices after fourty years of domestic inflation.
And that something has been the production costs.

Take for instance an old and very famous Dutch brand
like Oilily, which produced domestically manufactured children’s clothes of
impeccable quality and an almost endless life span. This brand has been
annihilated by the flood of cheap imports from the Far East, that were sold by
C&A, Hema, V&D and other store chains in the eighties, nineties and
zeroes.

At the price of one Oilily dress of €60, people could
buy up to five dresses from the likes of C&A and V&D. When you are a
lower or middle class family, with demanding children, what choice do you have
then?!

Cool and fashionable brands that were traditionally extremely
popular by adolescents and students, like Nike, Lacoste, FILA or Adidas did not
per sé have the need to produce in the low wage countries, in my humble opinion.
The presumed uniqueness, added value and fashionability of these brands would
make them relatively inelastical for (limited) price changes.

However, the bloody war for the consumer and the increasingly
outrageous sponsor budgets for official endorsers of these brands – famous sporters,
tournaments and national teams sponsored by these brands – as well as the will
to produce inexpensive shoes and clothing ranges for teenagers, made that these
brands also
moved their production lines to the low wage countries, in order to
keep their production costs low and their profitability at an elevated level,
in spite of the ever rising marketing costs.

And now the simple truth is that the domestic
production of inexpensive, daily clothing and footwear in Europe and the United
States is almost dead-before-dying and that our most beloved brands and store
chains produce these articles in sweatshops and megafactories in the low wage
countries; often under brutal
and extremely
dangerous circumstances.

If we don’t want to buy these brands at these very
store chains anymore, for the prices that we are used to pay nowadays and instead choose for “European / US made quality”,
we enter into a world of (extremely) expensive fashion and footwear from
factories in France, Italy, Germany, the United Kingdom or The United States.

This is a world in which a simple pair of jeans or
shoes would cost about €150 - €200, men’s shirts would cost at least €100,
women’s dresses would cost north of €250 and even simple things like T-shirts cost
€15-€25 each, instead of €10 per three(!). And that is not even including the bedazzling
marketing expenses that the famous brands spend on a annual basis.

Would this be a better world for everybody? Or would it
put the ‘enslaved’ workers in f.i. Pakistan, Bangladesh, Cambodia and Vietnam
in an even worse position: a position of ultimate poverty, without any source
of income to live from.

This is exactly where our second diabolical dilemma
rears its ugly head.

Should we boycott the brands and store chains that make
use of poorly paid and badly treated ‘slave workers’ from Pakistan, India and
Bangladesh, in order to enforce better labour circumstances, like decent people
with an ethical view on the world should do?!

Or should we continue buying the products from these
brands and store chains, as we know that at least some of the money – albeit a ridiculously
small amount of it –flows into the hands and wallets of the people that fabricate
these clothes. Hands and wallets that desperately need this money to have
something of a decent life for themselves, their children and loved ones. A
life that can uplift whole regions in these impoverished countries

And should we take for granted that the rich “slavekeepers”
in these countries (i.e. the executive managers and factory-owners of these
sweatshops) and the European / US / Australian brands with their multi-billion
dollar annual profits absorb the vast majority of the production payments and profits
and not the people who do the hard labour during up to 14 hours a day?!

And should we take for granted that in the near future
yet another production plant in one of these countries is set ablaze or
collapes during an earthquake, with probably again dozens or hundreds of deaths
as result.

It is like choosing between the Devil and Beelzebub
(Dutch expression):

Buying one’s goods from these brands and store chains,
like nothing happened before, will probably not change one thing in their unethical
behaviour eventually; in spite of all the empty promises about improved ethical
behaviour and production circumstances from these companies, the political
jawboning from national, European and US officials and all the good intensions
of involved parties during the last few years.

In the end, it are always the bottom line and the
lowest price which set the standards for manufacturing and trade in the footwear and fashion business .

Boycotting these brands and store chains, on the other
hand, will rob many, many families and people in the Far East from their only
income and from their ultimate chance for a slightly better future for
themselves and their loves ones.

Perhaps the only viable way for European, Australian
and United States consumers is to accept that we endured fourty years of (in
general) inflation since 1975 and that it would be nothing else than reasonable
that clothes will become at least twice as expensive as they are currently. Of
course, it is totally ridiculous that clothing and shoes hardly changed in
price since 1975, while everything else did. And of course it is ridiculous too
that store chains have no less than 5 or 6 collections per year and virtually
continuous clearance sales, instead of two collections and two clearance sale
periods.

The additional money coming from these higher prices could
then be used to dramatically increase the income, the labour circumstances and
the safety situation of those impoverished workers in the low wage countries,
like what happened in the coffee and tropical fruit industry in some places and
countries.

But please, let’s look at ourselves in the mirror! When
for instance Zara or H&M would double their prices and the rest of the
retail stores would not, we all would go to the other store chains that
maintained their old, low prices. Wouldn’t we?!

And that is the true diabolical nature of this dilemma:
there are no easy solutions!

Yesterday, I developed the idea to write an article
about Greece, in which I treated the country as the proverbial ‘Canary in a Coalmine’: a manifest
warning signal of when things seriously start to go wrong as a consequence of
underlying, less obvious causes.

Of course, I wanted to use the first verse of the
hilarious, namesake Police song about such a canary at the beginning of my article, but I knew that I
had used it before, some time ago.

What made this old article particularly interesting to read back, is that it originated
from September 2011: almost four years ago. In those days, the Greek crisis was still in
its early stages and the solutions seemed still quite obvious to me, albeit very hard to achieve in the political snakepit, called the EU.

Since then many things regarding Greece changed, but too many things didn't!

Therefore I wanted to use some quotes from this four year old
article to find out where we stand today; what has changed and what has stayed
the same about the Greek conundrum. Here are the most important quotes from this article,
accompanied by my comments, regarding the current situation.

Quote: During
the last three years, Greece had the dubious honour to be ‘the canary in the
coalmine’ for the Euro-zone. And darn it; what an interesting story this ‘bird’
had to tell

My
comments: Greek still is the canary in the coalmine; perhaps now more than ever.

Perhaps it is the first domino in a row to tumble, followed by other countries from the Eurozone. In my opinion, the Eurozone is to blame for that.

The Eurozone and the EU have merely kicked the can down the
road for almost four years now, while forcing brutal austerity arrangements upon the Greek
population, through the so-called troika of EU, IMF and ECB.

Even though the Greek economy started to reluctantlygrow in 2014 – after three years in which the Greek lower and middles
classes were economically starved to
death – the population was utterly sick and tired of the enduring crisis, as well as the insensitive and insulting taunts coming from the so-called ‘sensible” and creditworthy
Euro-zone members Germany, The Netherlands and Finland.

Especially the first two had partly shipwrecked the Greek
agricultural and manufacturing industry with their relatively cheap exports of
agricultural produce and commodities and goods. These products could be produced very efficiently and cheap, due to years of wage restraint that artificially suppressed the production expenses. Yet,
both countries Germany and The Netherlands fully blamed the economic misfortune upon the Greeks themselves, without looking at
their own part in this drama.

The Greek citizens became also totally fed up with the
corrupted and untouchable upper classes in their own country with their black money, their government protection and their hidden bank accounts. People, who refused to pay their fair share
of taxes and who did not want to be citizens with sensitivity regarding the interests of their
countries and their fellow-countrymen. They rather chose for their own egocentric interests and not for the economic health of their country.

As a matter of fact, the Greek population was so sick and tired of
the corruption and tax evasion of the Greek elites, the enduring austerity and the
financial undressing of the Greek social framework, that during the last national elections in Greece they gave their votes
to two parties at the outer rim of the political spectrum: Syriza at the left wing and ANEL at the right
wing. Exactly these two parties form a government since January 2015; very different, but bound by
their hatred for the corrupted upper classes in Greece and their disliking of the troika and the current political direction of the Euro-zone.

And while democracy had thus spoken out loudly in Greece,
the tone of voice of it was so not to the liking of the current leaders of the Eurozone, that the
Eurozone itself totally ignored the democratic turn-around happening in Greece: "resistance is futile!"

The Eurozone continued with its fiscal austerity programs for Greece and with its
amortization schedules for the Greek debt, as if nothing dramatical had happened: 'Democracy and elections are fine, as long as the results suit the interests of the Eurozone. If they don't, they will be ignored'.

Consequently, the Eurozone leaders refused to really negotiate with the new Greek leaders PM Alexis Tsipras and Finance
Minister Yanis Varoufakis about a new deal for Greece. And these new leaders, on their behalf, did very little to improve
the situation of their own country as well.

The result after the Greek elections has been an enduring farce about
miscommunication, misunderstanding, misplaced pride and arrogance and a dash of failed bluff poker, as
well as an almost suicidal desire at both parties to not come to a mutual understanding and
viable solutions:

Eurogroup
chairman Jeroen Dijsselbloem and German Finance Minister
Wolfgang Schäuble maintain their conceited stance towards Greece, as insulted
wallflowers at a school prom.

The former PIIGS countries Portugal, Spain and Italy are seemingly under the influence of the Stockholm Syndrome. These three countries want the Greeks to suffer even more from the austerity measures than they already did.

Obviously, Spain, Portugal and Italy have also suffered very much from the actions of the same troika parties themselves and don't want Greece to have 'an easy escape' in this matter.

Whether this prolonged austerity helps Greece and the Greek population to solve their economic problems, does not matter anymore. Everybody did it, so they have to do it to... until the bitter end!

And for Greece, especially Finance Minister Yanis Varoufakis has been so
entangled in his communication and so busy demonstrating his presumed intellect and his serious gaming
theory, that even his most avid followers don’t understand his strategy anymore.

These followers all come to the conclusion that Varoufakis probably does not have a strategy at all, but instead is playing a game of Russian Roulette with the Eurozone, which he is doomed to lose.

The categorical refusal of the Eurozone countries to write
down on the outstanding Greek debt ignores the fact that the Greek debt
position is not viable in the long run, according to various economists. It is a question of principle..., not of sense and sensibility!

Greece
needs a real helping hand now, instead of yet more debt for a prolonged period of time, but the Eurozone does not want to give this helping hand anymore.

And now, at this very moment, the only road ahead seems an official default, possibly
leading to a Grexit from the Euro-zone.

Quote: One
small group of relatively weak countries (the PIIGS) was (almost) enough
to demolish the Euro and, as a
consequence, the whole Euro-zone. The
political and economic unity in the Euro-zone was definitely ‘the weakest link’
and it almost led to ‘Goodbye’ for the Euro.

In the current structure, it is
impossible to make the quick decisions that are necessary to save a currency in
distress. The Euro-zone has acted more like 20 frogs in a wheelbarrow than as
a union during the last three years.

Especially
in difficult times, the policy of choice was the proverbial: “everybody for
themselves and God for us all”.

My
comments: The Eurozone definitely was the weakest link in hindsight…

Although many
pundits consider the Greek problem now as much more contained than five years
ago and don’t see a Grexit as a disaster of the first degree anymore, the
intrinsical weakness of the Euro itself and the Eurozone is currently more visible and obvious than ever.

The Eurozone has been disclosed as an emperor with very
little clothing on, whose only remedy against the economic crisis has been
austerity, more austerity and on top of it… austerity.

Real solidarity and cooperation between
the Eurozone countries is nearly dead and the only thing that seemingly
happened during the political assemblies was a continuous kicking of the can
down an endless road. That was until Mario Draghi as President of the European
Central Bank came to the rescue at multiple occasions.

Little has been achieved in Greece, Spain, Portugal and
Italy, regarding possible plans to make these economies really more
competitive, through more efficient and effective production of goods and
agricultural produce.

Instead of having looked for ways to cooperate and offer each other a helping hand, the Eurozone has acted like an angry cop, who only is interested in punishing offenders of the European laws. Therefore the expression Marshall Plan remains something of the
Second World War and unfortunately not of this crisis, as none of the Eurozone
countries had the guts and stamina to reinvent and deploy such a plan.

Therefore the only thing that really happened in the PIIGS countries (excluding Ireland) is that social and
personnel expenses have dropped significantly,
due to massive austerity on social security, pensions and welfare.

And there
has been an enormous increase in unemployment, which forced the costs of labour
down for the people that did find a job after all. "If you don't accept these lower wages I offer you, there are a hundred people behind you who will!"

The latter definitely made production
and exports in these countries cheaper and consequently it made their economy
somewhat more competitive. However, the lower and middle class population in these countries ended up being much poorer than they were before.

Summarizing, the austerity operation might have
succeeded in the PIIGS countries, but the patient (i.e. the average lower and middle class Joe Sixpack
in the aforementioned countries) has become critically ill.

Germany,
France, Finland and The Netherlands – although perhaps the economic ‘leaders’
of the Euro-zone – are not ‘The Fantastic Four’. Even with the roof and the
upper floors of the Euro-house burning, the sense of urgency to form a fire
brigade is still missing among the leaders of Germany, Finland and The
Netherlands.

France’s Nicholas Sarkozy feels this sense of
urgency, but is in his own country almost 'presidenta-non-grata'.

Germany’s
political leadership within the Euro-zone has weakened, due to its current weak
Chancellor Angela Merkel.

Europe
and the US in general share an immensely weak generation of politicians, who
are very accessible for the ‘vox populis’ and lack the necessary backbone for taking the hard
and impopular decisions.

The
European Commision, on paper the daily executive for the EU and the Euro-zone,
is exposed as a toothless tiger with exactly the weak kind of leaders that are
favorised by the national leaders of the participating countries: José Manuel
Barroso, Herman van Rompuy and Catherine
Ashton.

My
comments: Suffice it to say that the only real fireman of the
last four years has been Mario Draghi of the ECB, who did all the hard work for
the political elite. The elite itself rested on its hands ever since.In other words, these leading countries have indeed not been disclosed as the
Fantastic Four.

How much has really happened within the Eurozone and
the European Union? That is, except for the fact that now also the United Kingdom is
looking for the emergency exit of the EU and we have entered into a new cold
war with Russia, about a country – Ukraine – which we are not really planning
to help, as we can’t afford that, even though we said that we would.

In
France, one hopeless right-wing president has been exchanged
for an even weaker left-wing president;

Germany could not find someone more capable and brave than Angela
Merkel and the rest of Europe has probably even worse leadership in general. This
circumstance caused this ‘leading lady’ to turn into the autocratic Queen of Europe by default.

And with respect to POTUS Barack Obama? There are maybe dozens of
good things to say about him, but as a US president, he seems one big,
spineless failure.

The expression 'toothless tiger' describes exactly what the European executive leadership still is and will be in years to come.

'Bleak' José Manuel Barroso has
been succeeded by Jean Claude ‘Mr. Tax Ruling’ Juncker of Luxemburg and Frans
‘Hear me speak eight languages fluently’ Timmermans of The Netherlands: all form, but no function;

Last and least: ‘Invisible
Woman’ Catherine Ashton has been succeeded by her own sequel, Federica ‘la
donna invisibile’ Mogherini.

Is it any wonder that the European population has lost faith in its European leaders, when it has been 'rewarded' with leaders like the aforementioned ones?!

But
the Greek debt crisis might be a blessing in disguise for the Euro; finally
people started to think seriously about reinforcing the political union of the
Euro-zone and on the deployment of bonds covering the whole Euro-zone: the so-called Euro
bonds.

And
finally the awareness evolves among the European leaders and citizens that the
Euro is a marriage for eternity; not a Hollywood-marriage of which you can
easily divorce.

My
comments: How naive was I, when I wrote these words.

The political union as a part of the EU has rather weakened
than strengthened and the populist politicians have kept the debate about
reinforcement of the political union, in order to offer a stronger
framework for the Euro, hostage.

Everywhere in Europe and outside of it, a nasty
kind of nationalism is rearing its ugly head with more confidence and on every occasion it seems that
the even smallest political spark could be sufficient to let the EU implode.

Worst thing is that a Grexit is more and more becoming
an accepted risk for the Eurozone and nobody of the current generation of
politicians seems able and willing to turn the tides.

‘Who will be next... after the Greeks’ is the question burning on everybody’s
lips.

And that particular question turned Greece indeed into a genuine ‘Canary in a
Coalmine’.

Regular readers of my blogs know that I’m an ICT
consultant, specialized in software testing, and they may also know that I
started as a freelance consultant for Dutch company The Future Group since
December, 2014.

Those people may also know that I suddenly lost my
nearly two month assignment at a renowned Dutch bank at the end of March 2015,
due to budgetary reasons within the department where I worked. That was a quite
painful event for me which made a big impression, but as a freelance consultant
you know that you always work ‘in borrowed time’. You should never take your assignment for
granted; even when the outlook is that it will last for quite a long time.

Now I am more than happy to state that I have found a
new assignment and I will soon be back to work again. Thanks to my testing
experience and the financial knowledge that I acquired during the last
twenty-odd years.

What still bothers me, however, is the fact that I am
quickly approaching the ‘dreaded’ fifty years of age, which ‘apparently reduces
one’s chances on the labour market significantly’, albeit more of a problem for
unemployed people looking for fixed or temporary contracts, than for freelance
consultants.

I feel that I might have been lucky to find a new and
extremely interesting assignment again, within a few months of searching;
especially as having no assignment means having no income for a freelancer.

People around the age of fifty and older, working on
fixed contracts, have the reputation of being very expensive. They earn
relatively high wages in exchange for their work, based on the ‘superiority’ of
their gathered skills and experience, in comparison with starting workers. And
on top of that, they receive a progressive number of extra holidays, in
accordance with their age. These days are known in The Netherlands as “old fart
days” (i.e. ouwel*llendagen).

While especially these ‘aging-worker-days’ seem not
inappropriate by themselves for heavy, hands-on jobs or work that is otherwise
really exhausting,they apparantly lead to older workers being harder to
mediate, when in search of new jobs. Personally, I never had the feeling to be
entitled for them, leave alone that I really needed those days. They simply
belonged to the privileges I received, without really asking for them.

Many employers are scared to assign older workers on a
fixed or even a temporary contract, due to their “ill” reputation of being old,
very expensive and ‘often on sick leave or furlough’, even though the former of
these last two is hardly true.

This is the reason that being above fifty and
unemployed is a bad omen for many companies in search of new personnel on the
labour market.

Consequently, becoming unemployed at that age, is sometimes
a ‘one way street’ towards receiving the maximum duration of unemployment
benefit, before ending up with a welfare payment, which lasts until the
unemployed worker reaches the age of 65/66/67 (depending on the official
retirement age).

That is not good for companies, who miss out some very
skilled and experienced workers, of which the vast majority possesses the right
attitude for workers. And it is very sad for these workers, who are effectively
sent on a very early retirement, after which there is hardly a chance for
return to the labour market.

A few days ago, the Dutch Central Planning Bureau
presented an interesting report about this phenomenon on the Dutch labour
market, trying to find new ways to deal with this.

While the classic media jumped on the most ‘newsworthy’
conclusion, that the a. old fart days should be abolished and b. the height and
(to a lesser degree) the duration of the Unemployment Benefits should be
reduced, the report itself was quite discerning and well considered, and it
made some valid points about this very tough subject.

Here are the pertinent snippets from this CPB-report, accompanied by my comments:

Long-term
unemployment will decline as the economy recovers, but this will not solve the
problem of older long-term unemployed. Institutional reforms are needed to
solve this problem.

In
the aftermath of the Great Recession, the Netherlands is faced with 270,000
people who have been unemployed for more than one year, representing over 3% of
the labour force. In this respect, the Netherlands is doing worse than Germany,
the United States and the Nordic countries.

As
the economy recovers, long-term unemployment will go down, even without
government intervention. Following earlier recessions, the decline has been
around 1% and this is currently also a realistic prospect. The current relatively high level of long-term
unemployment in the Netherlands is the result of a slower economic recovery
than in other countries.

My
comments: This red and bold textpoints
to a distinctive problem of the Dutch economy. In spite of the very strong and
competitive nature of this Dutch economy itself, the recovery has been extremely
slow during the last few years. In my humble opinion, this is caused by the
limited focus of the Dutch government and employers on:

tax
increases;

austerity and budget balancing, in an economy in which
companies and consumers already kept their hands firmly on their pockets;

exports and – as a consequence – wage restraint, in
order to keep the Dutch prices competitive.

At the same time, the Dutch consumers came in a standstill
mode, with wages and rewards that hardly rose or even dropped during the crisis
years. And as a consequence of the failure of the Dutch government to really do
something more about the Mortgage Interest Deductability, than in fact kicking
the can down the road for another 30 years, the mortgage debt of Dutch households
remains skyhigh.

On top of that, it will rather rise again than drop
further, as municipalities and cities keep their groundprices very high and
there is still an (artificially maintained) elevated demand for additional
housing. This keeps the Dutch mortgage debt
at seriously high levels, in spite of the special savings’ and investment accounts,
which are established by the mortgagors to pay back the mortgage eventually and
still cash in the full amount of MID returns.

So the situation occurs that the export-oriented part
of the Dutch economy is doing fine, while the domestically oriented parts of it
are faltering: the consumers, as well as the Small and Medium Enterprises and
retailers. Of course, this is reflected in the yet elevated unemployment data
and the current, poor track records of SME-companies and the Dutch retail
industry.

The worst part is that this conundrum did not lead to
drastically changed policies yet, aimed at really aiding the faltering, domestic
economy. The focus of the Dutch government and employers’s organization remains
on exports and on pampering large companies, through favourable fiscal
arrangements and tax rulings..

Nevertheless, certain short-term measures may help to reduce
long-term unemployment. A temporary measure that could be effective is to
provide unemployed people with a financial bonus when they manage to find and
hold on to a job. Retraining may help people who used to work in one of the few
shrinking sectors and who are therefore unable to return to their former
profession.

My
comments: This red and bold textbothers
me personally. Although I have been without a job or an assignment on a small number
of occasions, I always felt the challenge and need to find a job or a new
assignment as soon as possible. I think that most unemployed people really do,
except for perhaps a few ‘diehard-unemployeds’, who prefer sitting at home
above working with new colleagues.

In my humble opinion, the idea of offering a bonus to
unemployed people, in order to let them search harder for a new job and work
harder when they have found one, is preposterous and sends the wrong signal to
the other unemployeds that immediately do their best to find a suitable job.
While I understand the ‘Pavlovian’ mechanism behind it, it seems a no go-area,
as far as I’m concerned.

The
current long-term unemployment has however brought a persistent problem to
light, namely that of the labour market for older people. More than 40% of the
long-term unemployed are over the age of fifty. Older employees do not lose
their job more often than others, but once they do become unemployed, their
chances of ending up in long-term unemployment are nearly double the average. Employers hesitate
to hire older unemployed people because these often demand a higher wage than
the employers are willing to pay.

My
comments: The problem of people at the age of fifty is, that
they often have older children, which are either on medium or high vocational
education or at the university. The first jobs of these children are often
hardly enough to pay for all of this. Consequently, these children require a
lot of money from their parents for their study and career development. That
means that their parents have higher expenses too than young, starting families
or bachelors.

Many older people would by themselves not have a
problem with earning a lower income, while starting at a new job, but would be
confronted with having “too much month for the height of their salary”.

On top of that, I suspect that many companies have cold
feet when hiring older workers anyway; not so much from their higher wages, but
rather due to their unfavourable reputation, which is often based upon the
wrong assumptions.

The
high share of older people among the long-term unemployment is a structural
problem rather than a cyclical one. Before the start of the crisis, this level
was already on the rise. The current package of policy measures – largely aimed
at lower wage costs – is insufficient to help the older unemployed to find another
job.

The correlation of the duration of the Unemployment Benefitand the chance of the unemployed person to find a new jobData courtesy of: www.cpb.nlClick to enlarge

More
fundamental reforms– such as unemployment benefits that decrease with the
duration of unemployment, employment protection that is less dependent on the
length of the labour contract, and less age-dependent arrangements in
collective labour agreements – are necessary to permanently improve the
position of the older unemployed (see the aforementioned chart).

My
comments: Two of the three measures are seemingly based upon the
assumption that older workers rather remain unemployed and ‘wait for the
perfect job at the perfect salary’ than accept one with less salary. For me
this is quite hard to believe and – when true indeed – I suspect that this is
more out of necessity, than out of a position of comfort.

Few people like being unemployed, in my humble opinion. Therefore most people
will accept a job with (slightly) less salary when the remaining salary is
enough to take care of their family and when the job itself is interesting and
challenging enough.

Forcing the unemployment benefit down progressively,
will probably not make it easier for people to find a job and it will make it
much harder for people to ‘survive’ their already hard and mood-spoiling time
of being unemployed.

However, as far as the age related benefits are
concerned in jobs, which are neither physically nor mentally extremely
demanding – the so-called old fart days – I would not mind when these are taken
away from the collective labour agreements (measure three within the
aforementioned red
and bold text). These old fart-days are a genuine‘ blast from the
past’, from times when jobs could be really heavy and physically/mentally
demanding for older people.

A
generous social benefit system also leads to more long-term unemployment and a
slower recovery from recession. In countries with higher and longer
unemployment benefits, the unemployed hold on to their high wage demand, which
in turn means it takes longer for them to find a job.

Such a higher ‘reservation wage’ – the lowest wage that the
unemployed are willing to accept for their new job – also has a positive side:
the quality of such a new job will often be higher, which leads to higher
productivity for those that do find a new job.

My
comments: This red and bold text exactly describes the conundrum
for older workers: should the government force people to accept lower paid jobs
or not through progressively diminishing Unemployment Benefits.

The ‘higher qualification’ jobs make people happier;
not only from the higher payment, but also from the intrinsical reward of having
more demanding and satisfying work. Hence: they lead to higher productivity and
more ‘working pleasure’ than a lower qualification job. Downside: such higher
qualification jobs are much more difficult to find and might therefore take
much longer time of unemployment.

In an ideal situation, reservation wage levels decrease under
prolonged unemployment. This would prevent human capital being discounted
through scarring and signalling. The degree by which the reservation wage
reduces, in actual practice, strongly depends on the maximum duration and level
of the unemployment benefits.

My
comments: I have a sneaky suspicion that the concept behind this red and bold text
might actually be true. There is, however, a dangerous aspect in it, as it could
push people in accepting jobs that they don’t like and in which they don’t find
any pleasure, with brute force.

When this is only for a short time, it is more or less OK,
in my humble opinion.

However, this policy change might cause older people to
get structurally off track in their career and in their lives, as it is very
hard to make the steps towards a better qualified job again, when you are
involved in a less interesting, but yet time-consuming job. This is the reason
that I consider this to be a quite dangerous part of this plan.

In my personal opinion, the reduction of Unemployment
Benefits should only be administered when genuine long-term unemployment is
looming for particular, individual persons, which don’t try hard enough to get
a new job.

It should not be meant as a structural policy for all
older, unemployed people after having passed a certain time boundary.

High
and long-term benefits enable the unemployed to hold on to a high reservation
wage. With 3 years and 2 months, the Dutch maximum duration of benefit payments
is long, from an international perspective. This maximum duration will be
brought down to 2 years under the new Dutch Employment and Security Act (WWZ),
which will be implemented on 1 July 2015

The correlation between the reservation wage and the duration of the unemployment in The NetherlandsData courtesy of: www.cpb.nlClick to enlarge

Unemployed
people in the Netherlands are hardly prepared to accept lower wages the longer
they are unemployed (see the left side of this double chart).

Older
unemployed people hold on to a higher reservation wage than young people (see the right side of this double chart). On the one hand, this is because of the higher wages that older
people had before they became unemployed, and because of more social security
rights, on the other. Older employees with a longer labour history, after all,
have longer rights regarding their unemployment benefit entitlements than do
young people with a shorter labour history.

My
comments: The first paragraph of this text already states that
the duration of the Unemployment Benefits will considerably decrease soon in
The Netherlands. In my opinion it would too much of a double whammy, when
together with the duration also the amounts payable of the UB would
progressively decrease.

Perhaps it would help people to find a job sooner or
perhaps it wouldn’t.

What it definitely does is putting people in an
unfavourable situation much sooner, as a consequence of not only the shorter
duration, but also the lower UB payments. This is a very negative kind of
stimulus, as it forces people at a certain age to accept any job that they can
find.

Summarized, I see the potential of the CPB plans to get
people to work earlier. Especially when these people are confronted with
Damocles’ Sword in their private life, due to largely losing their current
income and lifestyle. Thus they are stimulated to accept any job at any price.

Either way however, whether it is through payment of a
bonus for finding and keeping a new job or through the diminishment of the
duration and the height of the Unemployment Benefits, it is a very Pavlovian and
therefore rather uncivilized way of stimulating people.

In fact, it reduces
those same people to a kind of animals, which have to obey their duties or else…
I really don’t like such treatments personally.

Tuesday, 9 June 2015

Should
we be glad that the organization of the 2022 FIFA World Cup Football might soon be taken away from Qatar, because of the enslaved workers there, building the
stadiums and facilities?

Or
should we pity the fact that these poor workers might become deprived from
their only source of income and perhaps… a better future for themselves and
their family?! That is the diabolical
dilemma that we are currently facing!

May 2015 has definitely been the month of the world
football federation FIFA and their “good old” president Josef ‘Sepp’ Blatter.

In May, Sepp Blatter endured the ongoing FBI
investigation into the ubiquitous FIFA corruption of the last decades, as well as the recent arrest
of seven of his co-members in the executive board of this global football federation.

He did so in the utmost denial of anything being
wrong with him or with his conduct as FIFA president, akin to be like Manuel,
the helpless waiter from the British comedy series Fawlty Towers: “I know nothing. I am from Barcelona”. And even the accusations against him of
his former fellow official and "undisputed-top-dog-of-FIFA-corruption" Jack Warner
did not seem to hurt Blatter at all. Instead, all this flowed off of him, like water from a swimming duck.

After that, Sepp Blatter resisted the palace revolution
against his position as FIFA president, organized by the Jordanian prince Ali
bin Hussein, former Portuguese football superstar Luis Figo and Dutch football
official Michael van Praag. He did so with a superior display of ease and seemingly in total
control, knowing that he had everybody ‘in the pocket’. Everybody who
listened closely, could hear the sighs of relief in Moscow, Russia and Doha,
Qatar after Blatter’s re-election was a fact.

However, then the (un)expected climax came, when Sepp
Blatter resigned his regained presidency only a few days later, for reasons
unknown. And while we still not know
which ‘banana peel’ from the past made Blatter stumble, we suspect that his
road ahead was probably cluttered with such banana peels, waiting for him to stumble
upon.

The most radical consequence of Sepp Blatter, stepping
back as president of the FIFA, might be that the FIFA itself will feel forced to take the 2022 FIFA World Cup Football away from Qatar. After all, it seems clear
that this country has acquired the organization through massive bribery of FIFA
executives during the bidding process.

And by doing so, the FIFA might save the lives of dozens,
perhaps hundreds of ‘slave workers’ from
Bangladesh, Nepal, India and other East-Asian countries.

These poor workers build the stadiums and other facilities for the football tournament under the poorest of labour circumstances and with virtually no rights, forms of personal protection and
privileges. In many cases, the passports and other personal belongings of these
workers have been confiscated by their employers or their straw men, thus turning
the workers into ‘working slaves’, without any civil rights and legal protection at
all.

Every working day, these working slaves run an
unacceptable risk to lose their lives or their health, due to the relentless desert
heat, the minimal protective measures taken by their employers and the numerous
accidents, which happen at the various building sites in Qatar.

So one could easily think that it is a good thing after all, that all the
building activities for the 2022 FIFA World Cup Football might stop in Qatar.

But then what will happen with these poor, enslaved workers
from East Asia, when their only source of income vanishes? Will they be
sentenced to a life in utter poverty in their home country?!

Reluctantly, I must admit that the answer is probably ‘yes’!.
That is, until the next corporate bloodsucker comes along to offer them a new
job at extremely poor wages and under the poorest of labour circumstances. And
then, these workers will probably say ‘yes’ again to the offer at hand. Simply, because they need
the money!

As that is the diabolical dilemma with these so-called ‘slave
workers’: even the poorest, worst-paid job under the poorest of labour circumstances
generates at least an income and a prospect for a better future for the workers
and their families. Staying at home, jobless and without a future to look
forward to, doesn’t!

So, in spite of the terrible circumstances, the job in
Qatar might have come as a blessing in disguise for the tens of thousands of
workers from these poor, East Asian countries. They had at least a job and
earned at least some money that they could send home to their families. And
even the poorest of payments in Qatar was probably much, much higher than the
wages that they could earn by staying and working at home.

That is the reason that many, many fresh workers will
take the risk and run the gauntlet in the Qatari desert. All hoping to not die from
a heart attack or a heatstroke in the blistering desert heat. Or to become lifelong
disabled, as a consequence of an accident at the building site. They need the
money in order to get a better future for themselves, their family and loved
ones, no matter what.

Of course, the labour unions (f.i. the FNV labour federation) and other non-profit
organizations from The Netherlands and other Western countries are totally
right with their continuing battle against the many accidents, the poor labour circumstances and
the slave-like conditions for the workers in Qatar.

But there is also a certain
amount of hypocrisy in the Western complaints, as the western countries won’t
offer these workers a chance for a better future in ‘Fort Europe’ or ‘Fort
America’. Period! We are glad to help these Nepalese workers, as long as they don't decide to come to us, looking for a job in our very building industry.

And our Western companies themselves, who are operating
in the same East Asian countries?! These are not exactly renowned for the
generous salaries and wages, or the modern, ergonomical and safe production and
accomodation facilities that they offer to these workers, manufacturing our sport shoes, household electronics and clothing.

No, these companies are rather infamous for demanding the lowest cost
price for all production work in the clothing, footwear and manufacturing
industry in these countries. And everybody can know, by now: low cost prices and poor and dangerous labour circumstances are unfortunately birds of the same
feather.

So perhaps we should even hope that the 2022 FIFA World Cup Football is not taken away from Qatar. Not for the rich,
spoilt and oil-drained sheiks and other extremely wealthy citizens living there. People, who see this WC
as the ultimate toy to show off with…

But for the thousands and thousands of poor workers from
the East Asian countries, who desperately need their income from their hard,
hard labour in Qatar, while building the modernest and most luxurious temples for the most popular sport in the
world.

By coincidence, I chose to visit two separate sessions,
which dealt more or less with the ongoing energy transition in The Netherlands.
Especially this energy transition is a very interesting topic to ponder upon.

But what ís that so-called energy transition exactly?

Traditionally, electricity and gas have been typical substitute/
complementary utilities of a collective nature: virtually all households in The
Netherlands had either both or at least one of them. Both electricity and gas
can be used for cooking and heating the house and (on top of that) gas can be
used in order to generate electricity for household appliances, when the latter
is not available as a utility.

One of the growing number of houses in Almere,equiped with privately owned solar panelsPhoto copyright of: Ernst LabruyèreClick to enlarge

Another one of the growing number of houses in Almere,equiped with privately owned solar panelsPhoto copyright of: Ernst LabruyèreClick to enlarge

Both these utilities gas and electricity must be ubiquitously
available and they always have to work, at any time in the year, without any
disturbances and delays. Period…

The extremely high demands regarding the availability and
the meantime between failures of these utilities, as well as the massive
investments that had to be made by the central government to make them available all over the country, made
it typical collective utilities.

There was no way for people and companies to
arrange these utilities for themselves, due to the massive investments that these required. That was unless people decided to install propane gas tanks in their gardens and company
properties. This was something which virtually nobody wanted, of course.

Two of the growing number of houses in Almere, equiped with privately owned solar panelsPhoto copyright of: Ernst LabruyèreClick to enlarge

So when a new industrial/commercial zone was developed
or when a new neighbourhood was built, these collective utilities were always made
available for the new inhabitants of such areas.

While this is still true for the natural gas supply in
The Netherlands, there is a big change going on regarding the supply of
electricity: the energy transition.

One of the growing number of houses in Almere,equiped with privately owned solar panelsPhoto copyright of: Ernst LabruyèreClick to enlarge

During the last few years the availability and
affordability of solar panels exploded, due to the massive imports of relatively cheap
solar panels from China and due to special subsidies which enabled households to
buy such solar panels at a "bargain" price.

As there have also been growing
possibilities for companies, neighbourhoods and areas to ‘adopt’ a small
windmill or participate in a local solar farm, the effect was that more and
more households, companies, areas and neighbourhoods turned into nearly self-supporting
energy consumers.

This individualization process for the generation of
electricity has been further accelerated by the legally mandated possibility to
sell and deliver excessively generated electricity back to the ‘grid’, at nearly
the same price as for which households and companies normally purchase the electricity.

This process is powered by the national deployment of the so-called smart electricity meters, which monitor the exact energy usage online and real-time throughout the year and notice when locally generated electricity is delivered back to the grid.

The effect is that households, neighbourhoods and companies, equipped with solar panels, have turned into net-suppliers of electric energy during daytime – when the solar panels
yield the vast majority of their energy, but households on the other hand mostly require less of it – and net-consumers during evenings and nights – when the
solar panels don’t yield energy anymore, but households require most of their electric energy.

The same solar farm now photographed from a different angle,Photo copyright of: Ernst LabruyèreClick to enlarge

In my domicile Almere in The Netherlands, for instance, there is a steady
growing number of citizens that generate a substantial part of their electric energy
through privately owned solar panels or through a small solar park in the
neighbourhood, of which they are partial owner (see the aforementioned
pictures).

From the point of view of “greenification” of energy,
this is a very favourable development. The solar panels, when maintained and
cleaned normally, have a lifecycle of about 25 years and earn themselves back
in 5 to 7 years. This means that these solar panels earn money for their owners
for a period of about 18 to 20 years and on top of that help to diminish the pollution
coming from power plants, running on gas and coal.

A few of the hundreds of windmills near Almere which are used for private/collective energy generationPhoto copyright of: Ernst LabruyèreClick to enlarge

The same is probably true for privately owned
windmills, although these are much more susceptible for interferences, maintenance
and (extra)ordinary wear-and-tear and might have a less favourable earnings model eventually.

Although this all is very positive development from many points of view, there are yet a few
dangerous snags in the individualization of the electric energy supply in The
Netherlands:

The Grid

Due to the legal obligation for energy suppliers to buy back
excess energy from solar panels and privately owned windmills, there can be extra
strains within the Dutch energy grid, which is generally quite old and not fully up-to-date and capacity on many locations.

As most of the privately owned solar panels (i.e. owned
by households) yield their energy during times of low energy consumption (i.e.
daytime), there is the possibility that
this excess energy could lead to an overload of energy capacity on local and
municipal grids, especially in case of very sunny days, when a lot of energy is generated and little of it is used; an overload which perhaps can not be handled anymore by the Dutch national grid
owners TenneT, Liander and Alliander, when the number of privately owned solar panels keeps on rising.

Power plant in Almere, which might be abolished as a consequence of the individualization of energy generationPhoto copyright of: Ernst LabruyèreClick to enlarge

At the other hand, for such households with solar panelsthere is still a need to acquire energy from the national grids during evenings and nights.
Then the members of the household are at home and use all their electrical equipment, while their solar
panels don’t yield energy anymore. Especially the energy consumption of recharging
electric cars and plugin hybrids during evenings and nights is very considerable and
can lead to an excess demand for energy during night times.

In my opinion this conundrum must and can be solved through
the introduction of smart energy storages, which either use very efficient
batteries, hot water pressure tanks and solar boilers or high-tech capacitors. All these appliances must be able to store massive amounts of energy during daytime, while yielding the energy during evenings and night
time, when the demand for energy is highest.

I expect that some remarkable progress
will be made during the next decade with such smart energy storages, so this problem might solve itself soon.

Have and have-nots in energy supply?!

However, there might be a second problem which will be not so easy to tackle:

At this very moment, the people owning private solar
panels or participating in a local solar farm or windmill can still be
considered as front-runners, of which there are not too many.

They are a mixture
of idealists with a green heart and entrepreneurial middle and upper class
people, which are lured by the subsidies and the possibilities to save a considerable amount of money on
their energy bills.

However, when this individualization of the energy supply
marches on in The Netherlands, and especially the energy storage problem is cracked with the
invention and world-wide deployment of smart energy storage solutions, more and
more people could become totally self-supporting with their energy supply, within
perhaps one or two decades. This means that these people can eventually disconnect themselves
from the national energy grid and exclusively use their own private or local grid.

However,
this will not be possible for all people in The Netherlands.

Especially people in the lowest income classes, who simply
can’t afford such expensive solar panels and also cannot participate in a local
solar farm or windmill, or people living in condos and rental houses, who are
not allowed to do so either, will always remain dependent from the national energy
grid.

This means that the same national grid, bringing the
same massive infrastructural expenses for construction and maintenance, will be used by less and less people – and as a matter of fact mostly the poorer ones. As a consequence of this reduced usage, the grid expenses per unit might soar,
leading to substantially higher energy expenses for such poorer households.

These negotiations forced the national suppliers of energy (Nuon,
Essent, Eneco and others) to grant these companies massive discounts and perhaps
even to supply energy, close to or even below cost price.

As this is not a viable business model in the long run for the large energy suppliers,
these discounts need to be earned back from their private and small corporate customers, through an
increase of energy and energy transport fees.

In combination with the
diminishing numbers of private energy consumers, this could lead to a double
whammy for the lowest income classes, who don’t have the possibilities to acquire
their energy from an alternative source.

This could lead to a new generation of “haves and
have-nots” in The Netherlands, in which the latter have to mainly foot the bill for upholding the national energy grid.

So although you can consider me an endorser of the
currently ongoing energy transition, it would not be wise to close our eyes for
the unfavourable side-effects that this transition might have for the lowest
income classes in The Netherlands.

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About me

Hi, I am Ernst Labruyère. I live in The Netherlands with my wife Olga and my three children.
I blog on the Dutch, European and worldwide economies.
I try to bring you the interesting newsfacts and insights.
Besides doing photography and playing my electric guitar, I'd like to drive to my work with my racing bicycle. Saving the environment and getting rid of some pounds. I hope you enjoy this blog. Please let me know: @orbeaernie on twitter or ealabruyere@gmail.com